Lancashire Holdings Limited · LSE:LRE
Lancashire — FY2021 Earnings Presentation
35 slides from Lancashire's earnings presentation, 2022
Slide 1: Investor presentation Year-end 2021
Investor presentation Year-end 2021 Investor Presentation Full-Yearwww.lancashiregroup.com 2021 lancashiregroup.com
Slide 2: Safe harbour statements
Safe harbour statements NOTE REGARDING FORWARD-LOOKING STATEMENTS: NOTE REGARDING ALTERNATIVE PERFORMANCE MEASURES: Certain statements and indicative projections (which may include The Group uses alternative performance measures to help explain modelled loss scenarios) made in this presentation or o
Slide 3: Contents
Contents Year-end 2021 Year-end 2021 Year-end 2021 Highlights Business Loss environment development Investments Outlook Appendix Portfolio structure Delivering our strategy Investor Presentation Investor Full-Year Presentation 2021 Year-end 2021 lancashiregroup.com 3
Slide 4: Year-end 2021 Highlights
Year-end 2021 Investor Presentation Full-Year Year-end 2021 lancashiregroup.com 4 4
Slide 5: Year-end 2021 highlights
Year-end 2021 • Combined ratio of 107.3%, including significant Industry estimates of $105bn - weather and large loss events of $306.4 million. $130bn insured losses from natural • Weather and large losses in line with our risk tolerances and expectations for such events. catastrophes in 2021. One o
Slide 6: Expansion into new classes with the addition of new underwriting teams
Expansion into new classes with the addition of new underwriting teams. A transformational year for GPW increased by 50.5% year-on-year to $1.2b Lancashire, taking advantage of improved pricing to future-proof the business. Group RPI of 109%. Investor Presentation Full-Year Year-end 2021 lancashireg
Slide 7: Remain strongly capitalised and continuing to deliver on our strategy in 2022
Year-end 2021 Remain strongly capitalised and continuing to deliver on our strategy in 2022 Growing expertise, with new teams • Strongly capitalised for further growth in 2022 and continuing to build out beyond. Lancashire’s franchise. • Continuing to improve our capital efficiency; we have been bui
Slide 8: Year-end 2021: Business development
Year-end 2021: Business development Investor Presentation Full-Year Year-end 2021 lancashiregroup.com 8 8
Slide 9: Strong premium growth in 2021
Strong premium growth in 2021 Gross premiums written ($m) and cumulative RPI for the full year: 2017 to 2021 Total $1,400 150% $1,200 140% $1,000 130% $800 120% GPW increased by $600 50.5% year-on-year 110% from 2020 to 2021. $400 100% $200 $0 90% 2017 2018 2019 2020 2021 Investor Presentation Inves
Slide 10: Strong premium growth in 2021 by segment
Strong premium growth in 2021 Gross premiums written ($m) and cumulative RPI for the full year: 2017 to 2021 Property and casualty Property and casualty insurance Aviation reinsurance $600 150% $250 150% $200 160% $500 140% 140% 150% $200 $150 140% $400 130% 130% $150 130% $300 120% 120% $100 $100 1
Slide 11: Underwriting outlook for 2022
Underwriting outlook for 2022 We anticipate a fifth year of positive rate momentum. • 1 January property reinsurance risk-adjusted rate change in the high single to low double-digit range • Specialty insurance expected to remain positive, albeit the rate of increase is likely to slow We expect to gr
Slide 12: Deep dive into specialty: Lancashire Syndicate 3010 at Lloyd's
Deep dive into specialty: Lancashire Syndicate 3010 at Lloyd’s • Lancashire has carefully built out its specialty ‘Best in class’ performance at Lloyd’s – light touch syndicate business in s3010 since its acquisition in 2013, with the syndicate achieving ‘light touch’ Profitable growth in specialty
Slide 13: Year-end 2021 loss environment
Year-end 2021 loss environment Investor Presentation Full-Year Year-end 2021 lancashiregroup.com 13 13
Slide 14: Year-end 2021 loss environment
Year-end 2021 loss environment Accident year PY Development ($m) Weather and large 2016 AY & prior 17.7 loss events in 2021 mask the benefits of 2017 AY 18.4 rate increases on 2018 AY 7.1 underlying profitability. 2019 AY 8.8 2020 AY 34.5 Total 86.5 No change to our reserving • Combined ratio of 107
Slide 15: Catastrophe Business: volatile but profitable over time
Catastrophe Business: volatile but profitable over time Insured industry losses 1997-2021 1997-2020 Swiss Re 2021 Munich Re Sources: 2021 is estimated to Last five years of be one of the heightened costliest years on catastrophe losses, record for industry- preceded by five wide catastrophe relative
Slide 16: Combined Ratio Development
Combined Ratio Development Underlying combined ratio improvement since 2017 Underlying combined ratio Underlying combined 95% ratio of 75.7% 90% demonstrates benefit of expansion and 85% recent rate increases. 80% 75% 70% Attritional loss ratio 2017 2018 2019 2020 2021 for 2021 is 36% - at Combined
Slide 17: Strongly capitalised to take advantage of the improving market
Strongly capitalised to take advantage of the improving market Increase Decrease Total Note: We still maintain a strong regulatory capital position following the year’s losses with a solvency ratio of 222% at Q3 2021. Our year end position is likely to be higher than this as we expect that our 2022
Slide 18: Investments: portfolio structure
Investments: portfolio structure Investor Presentation Full-Year Year-end 2021 lancashiregroup.com 18 18
Slide 19: Investments: conservative portfolio structure – quality focus
Investments: conservative portfolio structure – quality focus Asset Allocation Credit Quality total investment portfolio and managed cash fixed maturities and managed cash Other government Private bonds and debt investment funds 3% 5% Hedge Funds 4% Index Linked AA, 39% A, 29% Securities US governme
Slide 20: Outlook: positioned for growth
Outlook: positioned for growth Investor Presentation Full-Year Year-end 2021 lancashiregroup.com 20 20
Slide 21: Guidance for 2022
Guidance Achieved Guidance Guidance for 2022 2021 2021 2022 New hires for the year GPW contribution $40m - $60m $95m $50m - $60m Attritional loss ratio 35% - 40% 36% 33% - 37% Reserve releases $40m - $60m $86.5m $70m - $80m Acquisition cost ratio 1-2%pt benefit vs 2020 1.7%pt benefit broadly the sam
Slide 22: Outlook: positioned for growth
Outlook: positioned for growth There is no change to our long term • We remain strongly capitalised to deliver on our strategy. We continue to strategy navigate the insurance cycle, manage the business for the long term, ignore Disciplined growth is important now the herd and be bold when we see tru
Slide 23: Appendix
Appendix Investor Presentation Full-Year Year-end 2021 lancashiregroup.com 23
Slide 24: Changing business mix drives changes in the attritional loss ratio
Changing business mix drives changes in the attritional loss ratio GPW by level of attrition • When Lancashire began writing business in 2005/6 around 80% of our premiums related 100% to low attrition/high volatility risk exposure. 90% 80% • As we integrated Lancashire Syndicates from Low attrition
Slide 25: Business mix benefits
Business mix benefits • The relative loss ratio split between attritional / large / • We continue to be flexible in the balance of business catastrophe varies by business line. between high and low attritional business, dependent • More attritional business generally has a lower capital on market co
Slide 26: Year-end 2021 loss environment
Year-end 2021 loss environment Lancashire’s AY 17 Catastrophe Gross Development vs PCS Estimate PY Accident year Development ($m) 2016 AY & prior 17.7 2017 AY 18.4 2018 AY 7.1 2019 AY 8.8 17 Q4 18 Q4 19 Q4 20 Q4 2020 AY 34.5 Gross ultimate PCS estimate Total 86.5 Investor Presentation Investor Full-
Slide 27: Claims inflation is not a major concern for Lancashire
Claims inflation is not a major concern for Lancashire • We write a predominantly short-tail book, with • Catastrophe modelling includes (our) inflation loading. the bulk of our policies renewing every year. • A weak relationship between claims inflation and • Policies renew through the year, not ju
Slide 28: Our approach to capital
Our approach to capital • Two of our three long-stated strategic priorities relate 2021 proforma capital requirement(1) to capital: Effectively Balance Risk and Return and Operate Nimbly Through the Cycle • We have a track record of active capital management, returning or raising capital where appro
Slide 29: Maintaining a strong capital position
Maintaining a strong capital position • We maintain a conservative capital position such that we can Our new Tier 2 withstand a significant catastrophe event and still retain our ratings and regulatory solvency position. subordinated debt is fully allowable as • Our key capital driver is the AM Best
Slide 30: Maintaining a strong capital position
Maintaining a strong capital position AM Best capital adequacy ratios (insurance industry under standard model)1 90 80 70 60 50 40 Coverage ratio of the available 30 Best's Capital Adequacy Ratio Best's Capital Adequacy Ratio Best's Capital Adequacy Ratio Best's Capital Adequacy Ratio statutory capi
Slide 31: ESG
ESG Investor Presentation Full-Year Year-end 2021 lancashiregroup.com 31 31
Slide 32: ESG strategy
ESG strategy Responsible investment Demonstrating our commitment to ESG through management of investments. Operating responsibly Running our business as a good corporate citizen, a responsible preserver of resources, and engaging OUR constructively with all our stakeholders to the Sustainable ESG be
Slide 33: ESG: Our journey
ESG: Our journey People and culture Operating responsibly • 2021 employee survey score of 88% (+3% on 2019) • Climate Change Working Group and ESG Committee established in 2021 • Named ‘Top 10 Employer’ in Bermuda in October 2021 • 100% off-setting of calculated own greenhouse gas emissions • Active
Slide 34: Lancashire Foundation
Lancashire Foundation Since the first donation in 2007, the Foundation has given $21.8 The Foundation million to charitable organisations across an ever increasing range of causes. During 2021, around $700,000 was distributed receives 0.75% of Group to charities. profits with a minimum • We believe
Slide 35: For more information
For more information Investor Relations Media Contacts Jelena Bjelanovic Peter Krinks Lancashire Holdings Limited Lancashire Holdings Limited 29th Floor, 29th Floor, 20 Fenchurch Street, 20 Fenchurch Street, London, EC3M 3BY London, EC3M 3BY T +44 (0) 203 300 1548 T +44 (0) 20 7264 4066 E peter.krin